AC 210 Lecture Notes - Lecture 34: Income Statement, List Of The Shield Episodes, Petty Cash

Evaluating The policies and procedures used to safeguard assets,ensure accurate business information, and ensure compliance withlaws and regulations.Internal Control of Coins, currency (papermoney), checks, money orders, and money on deposit that isavailable for unrestricted withdrawal from banks and otherfinancial institutions.Cash

The following procedures were recently installed by RaspberryCreek Company:

1)After necessary approvals have been obtained for the paymentof a A special form for recording relevant data about a liabilityand the details of its payment.voucher, the treasurer signs andmails the check. The treasurer then stamps the voucher andsupporting documentation as paid and returns the voucher andsupporting documentation to the accounts payable clerk forfiling.

2)The accounts payable clerk prepares a voucher for eachdisbursement. The voucher along with the supporting documentationis forwarded to the treasurer's office for approval.

3)Along with petty cash expense receipts for postage, officesupplies, etc., several postdated employee checks are in the Aspecial cash fund to pay relatively small amounts.petty cashfund.

4)At the end of the day, cash register clerks are required touse their own funds to make up any cash shortages in theirregisters.

5)At the end of each day, all cash receipts are placed in thebank's night depository.

6)At the end of each day, an accounting clerk compares theduplicate copy of the daily cash deposit slip with the depositreceipt obtained from the bank.

7)All mail is opened by the mail clerk, who forwards all cashremittances to the cashier. The cashier prepares a listing of thecash receipts and forwards a copy of the list to the accountsreceivable clerk for recording in the accounts.

8)The The analysis that details the items responsible for thedifference between the cash balance reported in the bank statementand the balance of the cash account in the ledger.bankreconciliation is prepared by the cashier, who works under thesupervision of the treasurer.

Required:

Indicate whether each of the procedures of internal control overcash listed above represents (1) a strength or (2) a weakness.

8/1 YOU filed a charter withthe State of Louisiana to form the YOUR Accounting Corporation. Thecharter authorizes you to issue 5000 shares of $2 par common stock.The state charged you a $75 fee to file the charter. Since yourbusiness is not yet approved, you had to pay this fee usingpersonal funds.

9/1 You received yourcharter from the State of Louisiana and officially opened yourbusiness. Your first order of business was to become ashareholder of YOUR Accounting Corp. To do this, you purchased 500shares of common stock by issuing a check to YOUR Accounting Corpfor $10,000. You used this money to open a checking account atFirst Funds Bank.

9/1 You rented an office forYOUR Accounting Corp. The monthly rent is $500, with the firstmonth’s rent due immediately. You issue check #100 to OfficeBuilders for the first month’s rent.

9/2 You then went to theApple store and purchased a new computer system for your business.Your Mac Pro cost $2700 and your new printer cost $450. You set upa 30-day account with Apple to make this purchase.

9/3 You ordered businesscards and stationary from Marketing Media on account. The ordertotaled $250 and will be shipped FOB Destination. (Record allpurchases of supplies in the Supplies on Hand account).

9/4 You decided to purchasea new vehicle for your business. Upon visiting Pro-Auto, you decideon a new SUV at a cost of $55,000. This vehicle will be used 100%for business purposes. You finance the vehicle with Pig E Bank at arate of 5% for 6 years. Your first monthly payment is due onOctober 4.

NOTE: You will need to create a loan amortization schedule todetermine the amount of the monthly note and the interest expensefor each month. You can use a website such as www.bankrate.com tocreate the schedule. When recording your journal entries, round allamounts to the nearest dollar.

9/5 You went to the KEMSupply to purchase supplies for your business at a cost of $600.KEM opened a customer charge account for you. The payment terms onyour account will be 2/10, net 30. The time period for determiningthe payment amount begins on the purchase date.

9/6 You purchased a one-yearauto insurance policy from InsureMart for $1200. InsureMart willsend you a bill for the policy. YOUR Accounting Corporationcapitalizes all insurance policies on the date of purchase andrecords the necessary expense at year-end as an adjustingentry.

9/10 Your first client, Red Fische, came intoday needing assistance with filing the appropriate paperwork tostart his new seafood restaurant. You issued invoice #1 to RedFische and he paid you an initial $2,000 Engagement Fee. Red Fischealso agreed to contract with you to provide accounting services for$2,500 per month.

9/12 You issue check #101 to YOUR AccountingCorp to establish a $500 Petty Cash Fund. You will use this accountto make small cash purchases.

9/12 You reimburse yourself for the filingfees associated with forming your corporation.

9/14 You paid KEM Supply by issuing check #102

9/15 You hire an administrative assistant,Mandi Handi, she will be paid a monthly salary of $1500. You havedecided that all pay periods will end on the last day of the monthand that checks will be issued on the 5^th of eachmonth.

NOTE: Assume the following rates when preparing the payroll:federal income tax 15%, state income tax 5%, and FICA 7.65%.

YOUR Accounting Corp. has state and federal unemployment insurancerates of 1% (FUTA) and 2% (SUTA) on the first $7,700 of wages peremployee. The employer FICA rate is 7.65%.

9/16 Marketing Media delivered your businesscards and stationary. Check #103 was issued to pay for thesupplies.

9/20 You visited a new client, Anita Cooke, toset up a Quickbooks accounting system for her new business, CookingFor You. You gave Anita and invoice #2 for the Engagement Fee andshe paid you by issuing a check in the amount of $2,000. Anita alsoagreed to a monthly fee of $1,500 for you to handle her ongoingaccounting needs.

9/22 You purchased $50 of fuel for your newSUV from Get ‘n Go. You charged this to your Get ‘n Go account.

9/30 Mandi sent pro-rated invoices, #3 &#4 , to Red Fische and Cooking For You for Monthly AccountingServices. The payment terms are 1/10, net 30.

9/30 You accrued interest on the Pig E. Banknote. Accrue interest based on the number of days in the month.

9/30 You computed and accrued the payroll forSeptember.

9/30 You received monthly bills for thefollowing:

Max Power Company - $100, terms n/30

WaterWorks #1 - $20, terms n/30.

CHART OF ACCOUNTS

ASSIGNMENT

In proper General Journal format,record the transactions for the month; include descriptions of eachtransaction with your journal entry. Use only the accounts shown inthe chart of accounts.

Journal all transactions:

8/1 YOUfiled a charter with the State of Louisiana to form the YOURAccounting Corporation. The charter authorizes you to issue 5000shares of $2 par common stock. The state charged you a $75 fee tofile the charter. Since your business is not yet approved, you hadto pay this fee using personal funds.

9/1 Youreceived your charter from the State of Louisiana and officiallyopened your business. Your first order of business wasto become a shareholder of YOUR Accounting Corp. To do this, youpurchased 500 shares of common stock by issuing a check to YOURAccounting Corp for $10,000. You used this money to open a checkingaccount at First Funds Bank.

9/1 Yourented an office for YOUR Accounting Corp. The monthly rent is$500, with the first month’s rent due immediately. You issue check#100 to Office Builders for the first month’s rent.

9/2 Youthen went to the Apple store and purchased a new computer systemfor your business. Your Mac Pro cost $2700 and your new printercost $450. You set up a 30-day account with Apple to make thispurchase.

9/3 Youordered business cards and stationary from Marketing Media onaccount. The order totaled $250 and will be shipped FOBDestination. (Record all purchases of supplies in the Supplies onHand account).

9/4 Youdecided to purchase a new vehicle for your business. Upon visitingPro-Auto, you decide on a new SUV at a cost of $55,000. Thisvehicle will be used 100% for business purposes. You finance thevehicle with Pig E Bank at a rate of 5% for 6 years. Your firstmonthly payment is due on October 4.

NOTE: You will need to create a loanamortization schedule to determine the amount of the monthly noteand the interest expense for each month. You can use a website suchas www.bankrate.com to create the schedule. When recording yourjournal entries, round all amounts to the nearest dollar.

9/5 Youwent to the KEM Supply to purchase supplies for your business at acost of $600. KEM opened a customer charge account for you. Thepayment terms on your account will be 2/10, net 30. The time periodfor determining the payment amount begins on the purchase date.

9/6 Youpurchased a one-year auto insurance policy from InsureMart for$1200. InsureMart will send you a bill for the policy. YOURAccounting Corporation capitalizes all insurance policies on thedate of purchase and records the necessary expense at year-end asan adjusting entry.

9/10 Your first client,Red Fische, came in today needing assistance with filing theappropriate paperwork to start his new seafood restaurant. Youissued invoice #1 to Red Fische and he paid you an initial $2,000Engagement Fee. Red Fische also agreed to contract with you toprovide accounting services for $2,500 per month.

9/12 You issue check #101to YOUR Accounting Corp to establish a $500 Petty Cash Fund. Youwill use this account to make small cash purchases.

9/12 You reimburseyourself for the filing fees associated with forming yourcorporation.

9/14 You paid KEM Supply by issuingcheck #102

9/15 You hire anadministrative assistant, Mandi Handi, she will be paid a monthlysalary of $1500. You have decided that all pay periods will end onthe last day of the month and that checks will be issued on the5^th of each month. Assume the following rates whenpreparing the payroll: federal income tax 15%, state income tax 5%,and FICA 7.65%.

YOUR Accounting Corp. has state andfederal unemployment insurance rates of 1% (FUTA) and 2% (SUTA) onthe first $7,700 of wages per employee. The employer FICA rate is7.65%.

9/16 Marketing Mediadelivered your business cards and stationary. Check #103 was issuedto pay for the supplies.

9/20 You visited a newclient, Anita Cooke, to set up a Quickbooks accounting system forher new business, Cooking For You. You gave Anita and invoice #2for the Engagement Fee and she paid you by issuing a check in theamount of $2,000. Anita also agreed to a monthly fee of $1,500 foryou to handle her ongoing accounting needs.

9/22 You purchased $50 offuel for your new SUV from Get ‘n Go. You charged this to your Get‘n Go account.

9/30 Mandi sent pro-ratedinvoices, #3 & #4 , to Red Fische and Cooking For You forMonthly Accounting Services. The payment terms are 1/10, net30.

9/30 You accrued intereston the Pig E. Bank note. Accrue interest based on the number ofdays in the month.

9/30 You computed andaccrued the payroll for September.

9/30 You received monthlybills for the following:

Max Power Company - $100, terms n/30

WaterWorks #1 - $20, terms n/30.

10/1 You paid the monthlyoffice rent of $500 by issuing check # 104.

10/2 You received and paidthe bill from the Apple Store by issuing check #105.

10/4 You make the firstmonthly payment to Pig E Banks by issuing check #106.

10/5 Igotta Troubles cameto your office looking for assistance with cleaning up heraccounting problems. You agree to assist her and agree upon anEngagement Fee of $2,000 plus an hourly charge of $250 for HourlyAccounting Services to be billed on the 15^th and30^th of each month with payment due in 15 days. Igottawrites you a check for the engagement fee in the amount of $2,000in payment of invoice #5.

10/5 You issued check #107to Mandi Handi for the September payroll.

10/7 You received a checkfrom Red Fische in full payment of invoice #3.

10/9 You decide that itis time to purchase a business cell phone. You visit the Applestore and purchase an Iphone 7 for a total purchase price of $849.You pay for the phone by issuing check #108.

10/12 You issued check #109 to MaxPower and check #110 to WaterWorks #1 in payment of Septemberutility bills.

10/14 You sent invoice to #6 to IgottaTroubles for 25 hours of Hourly Accounting Services, terms 1/10,n30.

10/16 You paid the fuel bill from Get‘n Go for the fuel purchased on 9/22 by issuing check #111.

10/18 Ima Payne comes to you needingassistance with depositing the monthly payroll taxes for herbusiness. You perform this service and hand her invoice #7 in theamount of $500 for Tax Services. Ima pays you in cash.

10/20 You received a check fromCooking For You in full payment of Invoice #4.

10/25 You Accounting Corp. declaredand paid dividends of $4 per share to its shareholders of record.The dividends are paid by issuing check #112.

10/30 You sent the following invoices,terms 1/10, net 30:

#8 to Igotta Troubles for 10 hours ofHourly Accounting Services

#9 to Red Fische for Monthly Accounting Services, and

#10 to Cooking For You for Monthly Accounting Services.

10/30 You accrued interest on the PigE. Bank note. Accrue interest based on the number of days in themonth.

10/30 You computed and accrued thepayroll for October.

10/30 You received monthly bills forthe following:

Max Power Company - $200, termsn/30

WaterWorks #1 - $20, terms n/30

Great Coverage Cellular - $50, terms n/3

11/1 You purchase a6-month liability insurance policy for YOUR Accounting Corp. byissuing check #113 in the amount of $300. YOUR AccountingCorporation capitalizes all insurance policies on the date ofpurchase and records the necessary expense at year-end as anadjusting entry.

11/1 You paid the monthlyoffice rent of $500 by issuing check # 114.

11/2 You make the secondmonthly payment to Pig E Banks by issuing check #115.

11/04 You purchase breakfast for theoffice from Cooking For You. You pay for breakfast by taking $20out of the petty cash fund.

11/05 You issue check #116 to MandiHandi for the October payroll.

11/06 You receive a $4,000 check fromIgotta Troubles.

11/07 You received full payment ofinvoice #10 from Cooking For You.

11/08 You issued check #117 to MaxPower and check #118 to WaterWorks #1and check #119 to GreatCellular Coverage in payment of October utility bills and Telephonebill.

11/10 You contracted Signs R Us todesign and fabricate a sign to place on your office to helpadvertise your business. Signs R Us gave you a bill totaling $600,payment is due upon delivery and installation of the sign.

11/12 You received full payment ofinvoice #9 from Red Fische.

11/15 You sent invoice #11 to IgottaTrouble for 15 hours of Hourly Accounting Services.

11/18 Ima Payne walks into your officeneeding assistance with Quickbooks Online. You pull up her businessand fix her problems. You issue invoice #12 to Ima for 4 hours ofHourly Accounting Services. Ima pays you $1,000 in cash.

11/25 You remitted payment to the U.STreasury for the federal income taxes, FICA taxes and FUTA taxesrelated to the September payroll (check #120). In addition, youremitted payment to the Louisiana Department of Revenue (check#121) for the state income taxes and SUTA taxes related to theSeptember payroll.

11/30 You sent the following invoices,terms 1/10, net 30:

#13 toIgotta Troubles for 12 hours of Hourly Accounting Services

#14 to Red Fische for Monthly Accounting Services, and

#15 to Cooking For You for Monthly Accounting Services.

11/30 You accrued interest on the PigE. Bank note. Accrue interest based on the number of days in themonth.

11/30 You computed and accrued thepayroll for November.

11/30 You received monthly bills forthe following:

Max Power Company - $150, terms n/30

WaterWorks #1 - $20, terms n/30

Great Coverage Cellular - $50, terms n/30.

12/1 You paid the monthlyoffice rent of $500 by issuing check # 122.

12/2 You make the thirdmonthly payment to Pig E Banks by issuing check #123.

12/04 You purchase $100 of postagestamps and make payment from the petty cash account.

12/05 You issue check #124 to MandiHandi for the November payroll.

12/09 You received the followingchecks in the mail:

Check #1212 from Igotta Troubles in the amount of $4,000

Check #809 from Red Fische in the amount of $2,475

Check #2569 from Cooking For You in the amount of $1485.

12/12 You remitted payment to the U.STreasury for the federal income taxes, FICA taxes and FUTA taxesrelated to the October payroll (check #125). In addition, youremitted payment to the Louisiana Department of Revenue (check#126) for the state income taxes and SUTA taxes related to theOctober payroll.

12/15 You send invoice #16 to IgottaTroubles for 10 hours of Hourly Accounting Services.

12/20 Ima Payne is back and needsassistance filing Federal Tax Form 990 for her business. Youperform this service and hand her invoice #17 in the amount of $500for Tax Services. Ima pays you in cash.

12/22 You receive a check in theamount of $5,000 from Igotta Troubles.

12/24 You purchased gift cards fromEatin Moore Grocers, to give as Christmas gifts to your clients.Eatin Moore charged your account in the amount of $1000 and gaveyou the bill.

12/30 You sent the following invoices,terms 1/10, net 30:

#18 toIgotta Troubles for 10 hours of Hourly Accounting Services

#19 to Red Fische for Monthly Accounting Services, and

#20 to Cooking For You for Monthly Accounting Services.

12/30 You accrued interest on the PigE. Bank note. Accrue interest based on the number of days in themonth.

12/30 You computed and accrued thepayroll for December. In addition to paying the regular monthlysalary to Mandi Handi, you also authorize a Christmas bonus of $500for Mandi and $10,000 for yourself.

12/30 You received monthly bills forthe following:

Max Power Company - $170, terms n/30

WaterWorks #1 - $20, terms n/30

Great Coverage Cellular - $50, terms n/30

Chart of Accounts: